The impact of relaxation in FDI rules in single-brand retail would be more
pronounced in the apparel, luxury goods, home decor, footwear, and
electronics segments, says Crisil. And with the government allowing 100 per
cent foreign direct investment (FDI) in single-brand retail under the
automatic route, the share of organised retail in India is expected to rise
to 10 per cent by 2020, up from 7 per cent in 2016-17.

Before this, Crisil had estimated the market share of organized retailers
to grow to 9 per cent of the overall industry, by 2020. The impact of
relaxation in rules would be more pronounced in the apparel, luxury goods,
home decor, footwear, and electronics segments.

Anuj Sethi, Senior Director at Crisil Ratings says the global single-brand
retailers facing growth headwinds in their key geographies will now be more
than keen to peg tent in India and those already present could step up
investments. The previous sourcing norms were a bottleneck to scaling up of
operations. At present only up to 49 per cent FDI was allowed through the
automatic route and investment above that needed government approval.

The cabinet also eased the local sourcing rules for foreign single-brand
retailers; such entities are not required to meet the 30 per cent target
for local sourcing by their Indian units for five years if they are already
doing so for their global operations. So far, single-brand retailers were
required to source locally 30 per cent of the value of goods purchased for
their Indian business initially as an average of five years; later they
were required to meet the requirement on a yearly basis. The relaxation of
rules will remove the entry barriers for foreign single-brand retailers
altogether and also help the new companies stabilize their sourcing base.